With all its great projects in preparation – the modernization of reactor 1 and the launching of work on reactors 3 and 4 – one would have thought that Nuclearelectrica (SNN) has no time for anything else! However, the company initiates and fuels public dialogue about small modular reactors (SMR), a technology it intends to bring to Romania. We talked to Cosmin Ghiță, the general director of Nuclearelectrica, about all these and about what should happen in 2021 for it to be labelled “The Year of Nuclearelectrica”.
Dear Mr Cosmin Ghiță, 2020 was not only the year of the pandemic, although I am convinced that for Nuclearelectrica, like for the rest of us, but it also brought major challenges from the point of view of securing the operational activity and protecting the health of employees. 2020 was, however, the year of a rapid and comprehensive change of strategy to the partnerships for the construction of reactors 3 and 4. At what stage are we today and how close or far from an investment decision?
2020 was indeed a challenge, well past by the SNN. About investment projects, I have gone ahead without delay, and I am referring in particular to the current investments and the new technology project, the detritiation plant, the production of Cobalt 60. Out sustainable approach and actions in 2019 allowed us to continue our projects in 2020.
Yes, 2020 also meant a change of approach for the project of units 3 and 4. The Romanian Government proposed in the General Assembly of shareholders the termination of the old partnership for units 3 and 4 by the resolution of the shareholders of June 2020, mandating the Management Board of SNN to initiate, based on the repeal of the previous strategy, further steps to analyze and crystallize the strategic options for implementing the project. Later in October, Romania and the US initialled the Intergovernmental Agreement, of which the nuclear projects in Romania are an integral part, even in financial terms, US EXIM agreeing to finance the construction of units 3 and 4 of the Cernavodă nuclear power plant. The Agreement was endorsed by the European Commission and subsequently signed.
In parallel to the agreement, SNN worked on analyzing the options and on updating the feasibility study through EnergoNuclear, to conclude that the project of units 3 and 4 is financially sustainable. Currently, we already have a GSM called for April 5 to approve the follow-up strategy for units 3 and 4.
It was a time when there was a lot of work on this project, with dedication, because we need these capacities installed in early 2030. As I have said, we aim to start construction in 2024 and by then to complete the first two phases of the new strategy: the preparatory phase, which mainly means contracting services, but also the launching and award of the engineering contract, procurement and construction and preliminary work stage – practically developing the critical engineering part of the project and completing this phase with an upgrade feasibility study, the final goal being, clearly, the final investment decision.
Once this decision is adopted, construction will take 69-78 months, so we would have an increase in nuclear capacity when Romania would need them in the system, for consumers and for achieving decarbonization targets.
Respecting the stages of the strategy is strongly dependent on the observance of the preliminary activities which must be corroborated with the timetable for the adoption of some decisions by the Romanian Government. I am referring here to the establishment of the financing structure. There are no high-capacity nuclear projects developed without the state playing an extremely important role. The new development strategy stipulates as a pre-requirement for the prior investment decision, the conclusion of an agreement between the Romanian state and SNN setting out the responsibilities related to financing, including the adoption of support mechanisms, and I refer specifically to the contract for the difference (CfD).
There will certainly be challenges, but the common aim of both the Romanian state and the SNN, as highlighted in the recent approach of the project, it is to have certain answers in terms of increasing energy capacity in the context of decarbonization and to carry out a strategic investment project at favourable conditions for Romania and its partners. Nuclear is necessary, that is clear, and so it is that to connect new nuclear units to the grid in early 2030 we need to act in sync.
Is there a risk that reactors 3-4 will not be built? How high is this risk, if any, and what factors could lead to such a decision?
No, there is no risk at the moment. Because nuclear energy is needed, there is a government strategy and plans to implement it. There is a framework for international cooperation between 2 states, Romania and the US, both considering nuclear power to be a firm option for decarbonization, not only in the medium term, through a fleet of high capacity reactors and, but also in the long term, through innovation, SMRs.
Coming back to policies, those that have already changed the paradigm, the European Commission’s Communication “A Clean Planet For All” states that “by 2050, more than 80% of the EU energy will come from renewable energy. Together with about 15% from nuclear power, these sources will form the backbone of a carbon-free European energy system”. The IPCC report “Global warming of 1.5°C” recognizes the key role of nuclear energy in keeping global warming below 1,5°C.
The advantages of continuing the nuclear program in Romania through the construction of units 3 and 4 in Cernavodă allow our country not only to meet the assumed environmental targets by increasing the contribution of energy from clean sources and by replacing fossil fuel-based capacities but also ensuring independence from imports and security of supply. Romania already has experience in exploitation and a supply chain developed since the years 1960, when the foundations of the Romanian nuclear program were laid. CANDU 6 units operating in Romania have demonstrated their reliability and high level of nuclear safety, which will be the technology used for units 3 and 4, with improvements accumulated over time.
The construction of Units 3 and 4 of Cernavodă NPP is included both in the Energy Strategy of Romania for 2030 with a view to 2050 and in the National Integrated Plan for Energy and Climate Change, with the pillars of decarbonization and energy security. From the perspective of Nuclearelectrica, the realization of Units 3 and 4 represents a strategic investment, with an extended socio-economic impact and with a lasting economic growth effect both by capitalizing on existing assets and by attracting and maintaining highly qualified labour in the country, improving and securing the national energy system, developing the horizontal industry, education, research and engineering in the nuclear and related fields, and cultivating Romania’s innovation capacity, with new technologies being a competitive advantage for any country: avoiding about 10 million tons of CO2 per year, an increase in employment to almost 20,000 jobs, multiple economic effects, stability in the system. Everything from one source!
In other words, global energy consumption is estimated to increase by 45% by 2040, which comes with the challenge of reducing CO2 emissions for many countries, amid the electrification of new industries such as mobility or housing. As the contribution of fossil fuel energy is expected to decrease in the energy mix and renewable energy is expected to increase, Member States face the imperative of ensuring the stability and resilience of their national energy system against fluctuations in production and consumption, maintaining a low tariff for the population and meeting environmental targets. A new challenge arises from the need to compensate for the intermittent nature of renewable energy sources, with constant low-emission generation sources. And here it is where nuclear power can and must play the leading role.
Recent examples in the United States (Texas) and the nearest in Europe have shown us the damaging effects of unbalanced energy systems. Current and future energy systems need low-carbon, affordable, band production capacity to balance intermittent renewable generation.
The construction of additional nuclear capacity in Romania would not only allow the use of assets that currently do not generate value but would put our country on an upward path toward industrial recovery by creating sustainable energy infrastructure conditions, without emissions and at a sustainable cost.
Do the partnerships which you are working on (US, France, Canada) address the other major nuclear projects, too, namely the upgrading of the Cernavodă unit 1?
The upgrading of Unit 1 is a project managed solely by SNN, with special dedicated own and attracted funds. Any upgrading project is a very complex one, similar to the construction of new reactors, only that is much cheaper. Incidentally, the upgrading of nuclear reactors currently has the lowest cost, of all sources, so we may still be able to debunk the public conversation about the high costs associated with nuclear plants.
We are in the first phase of the upgrading project, a phase to end with the completion of the feasibility study. Then we move into the contracting stage. At this stage, we will certainly work with partners from Canada, France and the US on the foundations of the project. Of course, after the feasibility study, at the beginning of phase 2, we will know much more clearly what we need and we will launch the procurement procedures. We are working on a robust project; we will use Unit 1 to generate power for an additional 30 years from 2028, so we want external know-how to complement our expertise.
With these two large projects in your hands, you have launched yet another theme – the small modular reactors (SMRs). I think about the Memoranda of Understanding (MoUs) you signed with American organizations (NuScale, USTDA) and public messages about the advantages of this technology. How close do you think it is the time we could talk about SMR commercial projects in Romania?
It is a long-term project, an evolution of nuclear technology in response to energy consumers’ demands for flexible, dispatchable and constant power sources, with shorter construction times. This is also mentioned in the Energy Strategy; however, if we need at some point, especially after the years 2035, to implement SMRs, we need to be prepared with the know-how and experience gained by other countries in developing these projects. That is why we are starting to analyze it with the US, Canada, European states. Hence the MoU signed in 2019 with SMR developer NuScale, which has already licensed SMR technology, as well as the cooperation with USTDA through a 1,2 million dollars non-refundable grant to identify possible locations.
For example, NuScale’s scalable project means that a nuclear power plant can accommodate up to 12 individual modules, which deliver the benefits of carbon-free technology and reduce the financial commitments associated with a gigawatt-based nuclear power plant.
As distinctive features, SMRs have the advantage of modularity, due to the manufacturing of major components and their transportation on-site, avoiding the complexity of assembling components remotely as we have to do for large reactors. Then we are talking about flexibility; SMRs can be used in smaller grids, for isolated areas, they can be adapted to different industrial areas, can work better in an energy mix with greater penetration of renewable sources. Also, they can couple with producing clean hydrogen, synthetic fuel for the transport system, heat heating, desalination.
SMRs technology is likely to be one of the most versatile in the long term in terms of nuclear energy’s contribution to reducing CO2 emissions, either on its own or in hybrid renewable systems. There is also a potential for Romania and SNN in this, which is why our interest in this technology and the exploration of some locations. We want to have all the data in case the Romanian state decides using this type of technology is appropriate for the future.
About SMRs, are the delays in having them implemented related to technical elements (confirmation of technology, security elements, etc.), financial issues (clarification of a business case adapted to Romania), limits imposed by legislation or security regulations?
We must bear in mind that small modular reactors are at the start of their road. I do not think that we can talk at this time of delays in their implementation, but of a natural stage in the development of new technology. In addition to development, adaptation is needed; regulatory aspects, legislation, supply chain. All these issues are already discussed globally at the European level. The pace of decarbonization has spurred unprecedented international cooperation to find innovative solutions. In practice, the nuclear industry seeks to ensure simultaneously, in the long term, production, reduced costs, flexibility and availability. The exact variables on which decarbonization depends.
In the last 12 months, the value of Nuclearelectrica shares has increased by about 50%. The obligation to sell part of the generated power at a regulated price removed, your revenues could increase substantially. What should happen in 2021 to call it “the year of Nuclearelectrica“?
Yes, the evolution of the SNN shares has been steadily increasing since 2017, with an increase of over 260% so far. SNN has entered FTSE Russell’s Emerging Market indices, combined with a beautiful story of a company that thinks for the future and works for today.
The liberalization of the energy market comes only with advantages, not only from the perspective of the producer but also of the consumer. Everyone has something to gain. Because the producers are in control of their production, to budget it and to build investment plans according to their achievements. This encourages new investments in this industry but also streamlines processes so that they become more and more competitive. Liberalization comes with the green light of predictability to investment and, in the short term, this means job creation, while in the long term it means a robust national energy system, with modern generation technologies which translates into low energy costs for the population, at the same time reaching environmental goals. There is therefore a clear link between energy price liberalization and energy investment in a planned, predictable way, based on coherent strategies.
For SNN it means predictability and maximisation of its production potential. The recent return to the regulated market has been a disadvantage for us. We had to block up to 65% of the production, which we had to use the majority of the spot market after the ANRE decision on the quantity to be sold on the regulated segment was issued. Hence, the increase in the presence of SNN in this market in 2020, as opposed to other years. As SNN is a constant generator of power, we are looking for stability, predictability and, therefore, for the forward market.
I hope that 2021 will be a good year from this point of view for SNN. In a liberalized market, everything depends on SNN’s sales strategy. Also, from the investment project perspective, we hope to return to a normal international supply chain and to carry out planned activities without a need for recalibration.
—————————————-
This interview firstly appeared in the printed edition of Energynomics Magazine, issued in March 2021.
In order to receive the printed or electronic this issue of Energynomics Magazine, we encourage you to write us at office [at] energynomics.ro to include you in our distribution list. All previous editions are available HERE.
[:]